Denmark

Danish offshore strategy moves closer to shore

DENMARK: The Danish government can look back on 2012 as a year when it made a series of crucial decisions leading to the renewal of its offshore wind strategy.

Indeed, as Windpower Monthly went to press, Denmark's political parties were hammering out final details of the most innovative element of the country's new offshore plans - those that deal with a series of near-shore sites that have been earmarked as suitable for offshore wind.

The driver behind all this activity was the approval in March by the new parliament to increase the country's aim and supply 50% of electricity from wind power by 2020. This goes beyond its commitment under the European targets to provide 31%of electricity from renewables. New offshore projects will play a crucial part in meeting this goal, with 1.5GW in additional offshore capacity now being planned by the Danish Energy Agency, a government body, with the active participation of other organisations, such as transmission system operator Energinet.dk and the Danish Wind Industry Association.

What makes Denmark's new approach to offshore wind so interesting is the way the country plans to combine both large projects that are sited a considerable distance from shore with smaller-scale near-shore projects. As countries such as the UK, Germany and even China have retreated from near-shore projects in favour of encouraging development of larger wind farms some way from land - this is particularly the case in the UK and some of its development sites for the third round of offshore projects. Yet Danish wind farms are heading back towards land.

Denmark's strategy may seem surprising but it lies, in part, with the 400MW Anholt offshore wind farm, which is currently being constructed and is set for completion in mid-2013. When Danish authorities invited companies to compete for the construction of Anholt they were surprised - and disappointed - to receive just one bid. This came from the country's largest energy firm, Dong. As well as being the only bidder, the company's price for building the project was relatively high - certainly higher than the cost of building earlier offshore wind farms in Danish waters.

A post-tender evaluation concluded that Dong's bid price was fair, particularly in light of some of the tender requirements, which included an ambitious development timetable. Indeed, the tight schedule for Anholt's construction, stipulated by regulators and linked to financial penalties, continues to be cited as one reason why other experienced offshore developers chosen not to bid.

As tendering approaches for two large offshore wind farms (see box below) and a series of smaller, near-shore projects, Danish authorities are keen to avoid a repeat of the Anholt bidding process. "We are going to secure greater competition in our future tenders," confirms Mette Cramer Buch, senior adviser for energy supply at the Danish Energy Agency. With this in mind, a dialogue between the authorities and the wind industry is planned for next year, she says. Some initial meetings with potential bidders for the two large projects have already been held, with Swedish utility Vattenfall amongst the companies weighing up their options.

While no one wants to say it out loud, the subtext is clear: Denmark may be home to the world's leading offshore wind developer, Dong Energy, but that does not mean the company should build all of the country's future offshore capacity.

Near-shore experiment

Denmark's energy ministry announced in September that it had identified eight sites all of which have the potential to host near-shore wind projects. Marked on the map, below, they are: Bornholm, Smalandsfarvandet, Sejero Bugt, Saeby, Vesterhav Syd, Vesterhav Nord, Jammerland Bugt and Jammerbugt Syd. The announcement does not mean that all eight sites will be developed, only that these are sites that have been subject to some screening and are deemed suitable for offshore wind developments.

At least three of the sites are expected to be developed by 2020, and are earmarked to contribute 500MW additional offshore capacity by then. The government has stipulated a 200MW cap per project, with 50MW of the 500MW total near-shore capacity to be used solely for testing new technology.

The definition of near-shore is defined by the government as between two and 15 kilometres from shore, with a minimum distance of four kilometres in areas featuring a fragile natural environment.

The choice to return to near shore is not because it has run out of suitable sites further from land, according to Sune Strom, chief economist at the Danish Wind Industry Association. "We have plenty of space at sea to fulfil our 50% wind energy target," he says.

The true motivation is the government's desire to increase competition and reduce costs. After the Anholt bid, Danish authorities asked developers what would prompt more of them to consider bidding for future offshore rights. One answer that came back - Danish developers would bid for offshore projects if they were smaller and focused on easier sites.

The hope is that near-shore sites policy will increase the number of developers involved and prove more cost-efficient, says Strom. How many do become involved may depend on whether the government stipulates that each project must be developed by a different company or consortium.

But the issue of cost reduction is difficult to judge. On the one hand, near-shore projects are expected to have lower construction and servicing costs because of their proximity to service harbours. They also require shorter export cables and may benefit from shallower waters and less technically-challenging seabed conditions.

On the other hand, if they are quite small - perhaps just 100MW or less - they will not benefit from economies of scale. And as efforts to cut the cost of large offshore projects continue, these smaller-scale projects may not appear as affordable in future.

Community inspiration

One aspect of the near-shore strategy that is likely to attract international attention is Denmark's expected introduction of compulsory community ownership. While this is not a feature of existing offshore wind projects in Danish waters, authorities drafting policy for the near-shore sites have been influenced by the country's onshore wind regulations, which now require 20% community ownership of new projects. For two years now, small stakes in onshore developments must be offered to local residents at cost price. It is this injection of democracy that other jurisdictions may wish to examine - even if they remain committed to building bigger and further from the shore.

As home to the world's first commercial offshore wind farm, Denmark can be proud of its track record in setting the agenda for innovation in offshore wind policy. Its experiment with near-shore sites may bring greater interest from the industry. But, it could make history as the world's first experiment with community ownership of offshore wind.

LARGE-SCALE GOES ON NEW CAPACITY UP TO 2020

Despite its intention to develop near-shore sites, Denmark is still planning to rely on conventional large-scale offshore projects to deliver two thirds of its new offshore capacity by 2020.

Two projects with a combined capacity of 1GW will be built, the smaller of which will be the third phase of the Horns Rev series, which lies off the western coast of Jutland. Horns Rev III will have a capacity of 400MW, bringing the Horns Rev series of wind farms to a total capacity of 769MW.

The second large-scale offshore wind farm planned for completion by 2020 will also be the country's largest. The 600MW Kriegers Flak project is sited off the country's east coast, close to both southern Sweden and north-east Germany.

While it is possible for both projects to be completed by 2020, meeting this deadline will be challenging. National transmission system operator Energinet.dk is already preparing tenders for environmental impact assessments and geophysical and geotechnical surveys. These must be completed by the end of 2014, after which there will be public hearings. Tendering for construction will take place once public hearings are complete.

The Danish government has announced that the earliest possible grid connection for Horns Rev 3 will be January 2017, while Kriegers Flak's earliest grid connection date is one year later. Specific dates for both projects should be issued in 2013, with a goal of allowing the developers that are eventually chosen to achieve full commissioning by 2020.

Erin Gill is news editor of windpoweroffshore.com

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